Evolution of Corporate Governance: How is Botswana faring? Part 7
In the last article, we continued discussion on the evolution of corporate governance. Consequently, we completed the last aspects of Canadian corporate governance development. We then moved into the Australian corporate governance development experience, and one interesting aspects of the discussion was the issues of proxy advisors. We shared an example of the effectiveness of the Australian Shareholders Association ( ASA) visa vie Tsunami dramatic natural disaster on which they had a commentary on corporate aids to the survivors of the disaster.
This week, we will be discussing France which has unique stakeholders’ relationship peculiarities which are caused by the evolution of corporate governance dominance by the State. In the middle of the 1990s, the advent of corporate governance reached France which, initially, started in Anglo- Saxon countries ( Wirt, 2008, cited in Hal Archives- ouverts, 2016). Most of the Organisation of Economic Co- operation and Development ( OECD) countries had opened their capital accounts and largely deregulated France, and floods of capital of equity capital was becoming visible across the globe. Equity flows are, primarily, driven by the United States of America ( USA) and the United Kingdom ( UK) pension funds and other Institutional Investors. The flows are the largest in France and Germany. Cross- border transactions in bonds and equities, as a percentage of Gross Domestic Product ( GDP) realised over 500percent in France and 100percent in Japan in 2003. In view of these developments, the capital market development was inevitable.
In 1995, Marc Vienot, a former Chief Executive Officer ( CEO) of one of France’s most important banks, published a report on corporate governance which enjoyed a widespread in the French business community. The report pronounced the following stipulations: director to act in all circumstances in the social interest of the firm. That put the report in a better perspective other than maximisation of the shareholders’ value.
The concept of the firm which underlies the Vienot report reflects the opinion of many of the managers in France ( Peyrelevade, 1998, cited in Hal Archives- ouverts, 2016. Traditionally, in French public opinion, profit has a bad smell ( Lesourne, 1998: 104, cited in Hal- ouverts, 2016). Usually, the dominant ideology of the firm favoured the prosperity and continuity of the firm. The traditional philosophy of the firm considers the interests of multiple stakeholders. The question was then, how are the stakeholders protected?
In the French tradition, the only suitable way to protect stakeholders is through the application of bureaucratic apparatus of the Government or the State. The State can ensure the alignment of all economic decisions with the previously described philosophy of stakeholder orientation. Albert ( 1991) states that France has cultivated social colbertism for a long time. That referred to Colbert, a very influential minister under France absolutistic monarch Louis XIV, summarised as follows: “the State commands the economy in the name of political ambition and striving for social progress ( Albert, 1991: 266 [ our translation]. From this perspective, the State’s role is perceived as one referee between the demands of different stakeholders. It acts in the place of the economic and social actors’ ( Les Echos, 1998 [ our translations]. In doing so, the State is a protector who assumes redistribution according to the republic on principle of ‘ egalite’” ( Les Echos, 1998, cited Hal Archives- ouverts, 2016).
It is important to emphasize that control instruments of quite different corporate governance systems are, theoretically, consistent with pluralist approach to the firm ( Hal Archives- ouverts, 2016). Why then, does the French tradition assign such a control role to the State despite privileging the mechanisms of direct negotiation between different stakeholders’ categories? That state of affair would, inevitably, cause polarization of in